On October 18, 2012, the World Gold Council, an industry organization made up of 23 companies representing approximately 60 per cent of global corporate gold production, published its Conflict-Free Gold Standard (Standard). The Standard provides for gold-producing mining companies to disclose the extent to which their operations are ‘conflict-affected or high-risk,’ including the measures taken to avoid causing, supporting or benefiting unlawful armed conflict or contributing to serious human rights abuses or breaches of international humanitarian law.

Starting January 1, 2013, participating companies are required to publicly account for their compliance with the Standard in the form of a Conflict-Free Gold Report, published either in company documents (e.g., the annual financial report or the sustainability report) and/or on the company website. This should be done at least annually and will cover activities over a 12-month period. Whereas external assurance will be required on this disclosure, companies will be allowed to make the claim of compliance with the Standard on first-time reports before receiving external assurance.

The Standard arrives on the heels of the implementation, on August 22, 2012, by the U.S. Securities and Exchange Commission (SEC) of Sections 1502 and 1504 of the Dodd Frank Wall Street Reform And Consumer Protection Act (Dodd Frank Act). Section 1502 regulates disclosure by U.S.-listed manufacturers of conflict minerals, including gold, produced in the Democratic Republic of Congo (DRC) region, while Section 1504 regulates disclosure by issuers in the extractive sector of payments to governments, as discussed in a previous article. The World Gold Council states on its website that it “firmly supports Section 1502 of the U.S. Dodd-Frank Act and its humanitarian goals.”[1]

Alongside the complementary nature of the Standard with the Dodd Frank Act disclosure provisions, the Standard will act as an ‘Industry Program’ to operationalize the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance). It is also designed to complement and integrate with other industry-led initiatives, including the London Bullion Market Association’s Responsible Gold Guidance.


The Standard applies to World Gold Council member companies and other entities that choose to apply it. Canadian-based companies represent more than half of the World Gold Council membership: Agnico-Eagle Mines Ltd., Alamos Gold Inc., Barrick Gold Corp., Centerra Gold, Eldorado Gold Corporation, Goldcorp Inc., IAMGOLD Corporation, Kinross Gold Corporation, New Gold Inc., Primero Mining Corporation and Yamana Gold Inc., with associate member Franco-Nevada Corporation.


The Standard is divided into five parts, as follows:

Part A – Conflict Assessment

Firstly, the company will assess whether the area in which the mine is located or through which the gold is being transported while in the custody of the company (the Area) should be categorized as ‘conflict-affected or high-risk.’ The method of assessment is two-fold:

  1. International sanctions: the company will determine whether the Area is subject to international sanctions, imposed by supra-national bodies such as the United Nations, the European Union, the African Union or the Organization of American States, and whether these sanctions apply to the exploitation of gold. Where the assessment concludes that gold cannot be mined or transported, the mine is considered to be in non-conformance.
  2. Recognition of conflict: the company will determine whether the Area should be considered ‘conflict-affected or high-risk’ by referencing the Conflict Barometer produced by the Heidelberg Institute. Areas will be considered ‘conflict-affected or high-risk’ if they are currently ranked, according to this source, as 5 (war) or 4 (limited war) or have been at any stage during the previous two calendar years. These types of conflict are generalized and do not include non-violent or localised social conflicts with the local community. Moreover, even in the case of generalized conflict, the company has some discretion to change the categorization of the Area if it can show that such designation is inaccurate. If the company determines that the Area is not ‘conflict-affected or high-risk’, it can move on to Part D (Externally Sourced Gold). Otherwise, it will proceed to Part B (Company Assessment).

Part B – Company Assessment

Where the Area is assessed to be ‘conflict-affected or high-risk’, this next step determines whether the company has the appropriate systems in place in order to comply with its corporate obligations, to avoid causing, supporting or benefiting unlawful armed conflict, or contributing to serious human rights abuses or breaches of international humanitarian law. Where minerals may be contributing to conflict, the company needs to institute a Remedial Action Plan (the “Plan”) to address the risk identified and avoid gold being categorized as being in non-conformance.

The company assessment addresses the following areas:

  1. Commitment to human rights: in order to be compliant the company operating the mine must have a published statement on not supporting unlawful armed conflict, respecting human rights and not tolerating exploitative child labour, and it must implement the Voluntary Principles on Security and Human Rights or a comparable system.
  2. Corporate activities: where the mining operation is the subject of credible allegations of serious human rights abuses or breaches of international humanitarian law, it must publicly address the allegations and use its influence so that such activities are not repeated in order to be compliant with the Standard. If the company has been convicted of such violations in the past two years, aside from the responses above, it must put in place sufficient remedial measures to prevent a recurrence.
  3. Security: the company must ensure that its security providers, agents and employees are not participating or benefiting from the conflict. Where, in the previous two years, a private security provider has been convicted of or credibly implicated in human rights violations, the company must implement a Remedial Action Plan and provide evidence of its effectiveness. In the case of public security providers being similarly implicated in human rights violations, the company must use its influence to ensure that such personnel are removed from its security services.
  4. Payments and benefits-in-kind: the company must publicly disclose payments to governments, at a level comparable to industry standards, unless prohibited by law or contract; the company must have a policy disallowing payments or other benefits to non-governmental groups involved in human rights violations and must undertake risk-based due diligence to mitigate against such events; and the company must have a policy preventing bribery and extortion. Moreover, companies should use their best efforts to avoid payments to public security forces, unless provided by law in a transparent manner.
  5. Engagement, complaints and grievances: the mine must have a whistle-blower program in place, a process for engaging with local stakeholders including marginalized groups such as youth, women and indigenous groups, and a grievance mechanism through which employees, workers and those affected by the mine operations can raise concerns about the mine’s activities in an effective manner. Engagement plans should include, where appropriate, relationships with artisanal and small-scale miners, seeking their formalization.

Part C – Commodity Assessment

Where the Area is assessed to be ‘conflict-affected or high-risk,’ this next step determines the processes in place to manage the movement of gold and gold-bearing material while in the custody of the company, so as to mitigate against the misuse of this material by groups associated with unlawful armed conflict.

  1. Nature of gold production: where the gold-bearing material leaving the mine site cannot be easily processed into gold, and can be segregated from the gold-bearing material that can be easily processed into gold, the company can move straight to considering transport (Section 3). Otherwise, the company must proceed to the next step.
  2. Control of gold at the operation: the company must have management systems in place to track the flow of gold-bearing material in the mine’s area and minimize the risk of illegal addition or theft of gold and gold-bearing material. These management systems include traceability systems and reference systems to uniquely identify each batch of material.
  3. Transport: the company must undertake due diligence on intermediaries who transport gold or gold-bearing material; this material must be transported in accordance with an ‘Integrity of Shipment’ process to ensure that the same material that is shipped from the mine is that which arrives at its destination; material compliant with the Standard must be capable of being segregated from material that is not compliant throughout its transport.

Part D – Externally Sourced Gold Assessment

When the mine acquires gold from external sources, this next step determines the process that needs to be in place to ensure that appropriate due diligence is undertaken in relation to any potential involvement in causing or supporting unlawful armed conflict. Firstly, the company must determine whether the gold or gold-bearing material is potentially from a ‘conflict-affected or high-risk area,’ using the method outlined in Part A (Section 2) of the Standard. If the material is from a ‘conflict-affected or high-risk area,’ the company must continue the diligence in line with the OECD Guidance.

Part E – Management Statement of Conformance

Where management believe that the mine conforms with Parts A–D (as relevant), a statement of compliance is provided by the company’s management to the next party in the chain of custody. Gold or gold-bearing material that is not in conformance with the Standard will need to be specified as such.

Deviations from Conformance

Where a mining operation does not adhere to one or more of the Standard’s assessment criteria (aside from minor/administrative issues), it is considered to be in deviation from conformance with the Standard. Notwithstanding the occurrence of a deviation, a mining operation can remain in conformance with the Standard by adopting a Remedial Action Plan within 90 days of management becoming aware of the deviation. The Plan must set out the corrective action to be taken by the company and an estimated timeframe for implementation. This disclosure must be included in the company’s Conflict-Free Gold Report.

The mine will be in non-conformance with the Standard if the company: (1) adopts a Remedial Action Plan but fails to implement it in a timely manner; (2) declines to adopt such a Plan; or (3) recognizes that the Plan is insufficient. In this case the company must publicly disclose the non-conformance of its mine with the Standard and notify the next participant in the chain of custody, and the company’s management is no longer permitted to provide a Management Statement of Conformance.

Guidance for Implementing Companies

In parallel with the Standard, the World Gold Council has developed a Guidance for Implementing Companies, which is a non-prescriptive tool providing examples of reporting.

Guidance for Assurance Providers

External assurance is required on the Conflict-Free Gold Report in the form of an independent assurance report covering the same 12-month period. The external assurance provider applies recognized benchmarks in order to determine whether the company’s Conflict-Free Gold Report is prepared in accordance with the Standard. The World Gold Council has developed a Guidance for Assurance Providers in order to assist external advisers and ensure consistency in reporting across companies.

In summary, to conform with the Standard, a company should:

  • adhere to the requirements in the Standard set out in Parts A–E;
  • report publicly on their conformance in an annual Conflict-Free Gold Report; and
  • obtain independent assurance on the Conflict-Free Gold Report.

Management’s responsibilities

The management of implementing companies are responsible for:

  • demonstrating conformance with the criteria in the Standard;
  • preparing the Conflict-Free Gold Report in accordance with the Standard;
  • appointing an independent assurance provider using the competencies set out in the Standard; and
  • providing access to all evidence required by the assurance provider.

Relationship with the Dodd-Frank Act

Whereas the Standard can assist companies to meet their Dodd-Frank disclosure requirements, its objective is also to prevent a de facto boycott of gold from the DRC region due to the potential reputational hazard created by Section 1502, i.e., labeling minerals as “conflict minerals” based on their place of origin and irrespective of whether they actually contribute to conflict in a manner that can be affected by the company. The Standard is therefore provided by the World Gold Council as a possible solution to the concern that legitimate investment would be discouraged by Section 1502. As such, companies can prove that they are able to operate in conflict areas in a responsible manner.

Below are some of the main differences between the Standard and the Dodd-Frank disclosure requirements:

  • The Standard is voluntary, whereas Sections 1502 and 1504 are binding legal obligations for U.S.-listed companies;
  • Section 1502 does not apply to mining companies unless these companies also manufacture the minerals (and are listed in the U.S.), whereas the Standard applies specifically to mining companies. These disclosure requirements are therefore complementary because a mining company would provide a manufacturer with a Management Statement of Conformance, thereby assisting the manufacturer in its due diligence pursuant to the Dodd-Frank Act;
  • Section 1502 only applies to conflict minerals from the DRC region, whereas the Standard applies to a broader range of conflict areas, as determined by the Heidelberg Conflict Barometer;
  • Section 1504 applies to mining companies, just as the Standard does, but the former’s purview is limited to mining companies listed in the U.S.;
  • Section 1504 applies to payments that equal or exceed $100,000 during the most recent fiscal year, whereas the Standard has no minimum requirement;
  • Section 1504 applies also to payments made by as subsidiary or another entity controlled by the affected issuer, whereas the Standard is silent on this point; and
  • Section 1504 provides no exception for instances where disclosure of payments may be prohibited by law or contract, whereas the Standard does provide such an exception.